Family income 120k - would you borrow 400k in today's climate?

[hophapjoi]

Have to move and already have an offer on our current property but mulling over our options and have slightly different takes on it. We are both in our early 40s and joint income is 130k - and have found a property that we could live in long term (though it is a two bed so wont ever be able to downsizes) but that would need borrowing 400k. The bank will lend us up to 530K but that seem insane in the current climate. However, DH thinks that 400k is doable for somewhere we'd plan to stay indefinitely. Am feeling very nervous. We do live in London where things are expensive but both work in the public sector so arent expecting massive salary increases any time soon despite today's announcement. Are we crazy to be borrowing 400k on our salaries in the current climate?

No, I wouldn’t. It’s too risky at the moment.

I think £400k is doable on your household income but no way would I be taking it on in my 40s.

It sounds like you've discussed it with your partner and worked out what you can afford. I would do it.

Having just moved 3 months ago and bought strictly within budget, I feel a bit annoyed with myself. The house is okay but it needs work which will cost about £60k.

It’s just over 3 times your salary so affordable.

Yes, I’d go for it. Although it’s scary just now, mortgage rates are predicted to drop back a little over the next year.

You aren’t planning on moving again, have secure jobs and know what you’re getting into.

I don't think that's crazy at all, do you have childcare costs?

There will always be people advising you not to borrow more than a fiver, as they bought a house for 50p back in 1983 and paid it off early through hard work and self-denial.

yep

Yes, similar income (sole earner) and slightly larger mortgage and it’s fine and we have another 27 years left on it. We do expect family income to increase in the future but not hugely.

Our new rate is coming in at then end of the year and even though the repayments are higher it still leaves a good chunk left for everything else.

Personally, no 🙈 We have £450k on our mortgage, a household income of £225k with the potential of £240k if I increased my hours back up to FT and it’s already giving me the heebie-jeebies about remortgaging at the end of next year.

This doesn't make any sense

We took a similar mortgage on similar income on the basis our salary should still continue to go up with future expected promotions (early 30s). Besides we find the monthly repayments fine.

OP - key drivers for me are your age, future expected salary changes, and whether monthly repayments are fine. To be honest if monthly repayments are fine then there’s no issue for me. Although you could model at a higher interest rate for your peace of mind.

@AnoyDad2023 What is a financial adviser going to tell me? I understand interest rates, I also understand uncertainty. We can't leave London right now due to jobs and elderly parents. We are in the income bracket where two railcards is more expensive than staying put. We live in London so buying things for 500k would land us far away from schools and a tiny flat.

Am just nervous because things are uncertain l. We do have good insurance so it should pay out if we are ill, have great death in service benefit i.e. mortgage will be paid off. It just feels like a lot of money.

We earn a similar amount in our 40’s and absolutely no way would we have considered it , but but we’re lucky we live in a cheaper part of the country so managed out forever house without massively stretching ourselves.

We’ve got plenty of savings, very little debt and can whatever we like. We will be mortgage free by 50. Having a massive mortgage now would freak me out - as would the thought of having be paying one off until we’re 70. Fuck that.

Hmm we have similar household income and I’m early 40s , DH five years older… And I’m Not I’m not sure I would borrow that much. The only way I’d move is if it was for a like for like mortgage (we have sub £50k left) or if it freed up a chunk of equity. It just feels a bit risky to take on more debt at this stage especially as rates are rising and it’s much more unpredictable.

It sounds like you'd have over 4.5k let after paying the mortgage. Is that right? Because it's absolutely loads. You can very easily live off that, even in London. Unless you have 12 children, 7 horses or a 300k credit card debt you've not mentioned. I'd do it I think but also take out insurance in case you lose jobs.

We take home £130,000 too. Mortgage of £374,000 when we first took it out. We are doing OK but only £1500 left each month after all other bills etc so whilst for many that sounds a lot, we prefer to have more ‘left over’ for holidays and any home improvements. I personally wouldn’t want to borrow £400,000 as you won’t have many years to spread it over so payments will be big surely at current interest rates?

It all depends on LTV rate / deposit - if you are buying a £500k property with a £400k mortgage then I'd be nervous but a £1m no problem.

What is making you nervous exactly? Losing your job? Interest rates. That's a relatively small % of net salary going on housing for London. I would do it. You've got to live somewhere and it's better to be somewhere nice and where you like. No point economising and living miserably.

We're early forties and about to go up to 250k mortgage, joint income of 170k and to be honest it feels a lot. (House is 930k).

We just don't like a large mortgage payment Incase life goes tits up. However our pensions are crap, so we will sell and downsize once kids have launched, so it's an investment in retirement.

Our joint salary is slightly less and we have borrowed slightly more. Also live in London. Not worried.

Am also worried about the amount. However, having a 250k mortgage would basically get us a 60m2 flat. Which also seems ridiculous with DC still in primary.

We have a household income just under yours and moved 2 years ago in our early/mid 40s. We borrowed £140k and to be honest it made me nervous borrowing that much in our 40s. I feel like lots of things can go wrong as you get older - especially ill health. I've already had cancer once. I also didn't like the fact we'd be paying a mortgage well in to our 60s.
My DH pointed out that if ever we can't afford the mortgage we can just sell the house which I suppose is true.
I'd be uncomfortable with it but obviously others wouldn't.

I can't see a huge issue with this. My main concern would be if I needed to move again any time soon.

We earn similar and borrowed slightly more late last year. Fixed for 3.38% for 5 years. I was really stressed about it but we can afford it, and we are paying nursery fees but only for a few more months. Also have the potential to earn a bit more as I can increase my hours at work. We are late 30s, we took a 30 year term which is horrible but we will start overpaying once we have made some improvements. We’re also thinking we might downsize once kids are at uni, we’ll see how things go! Hoping the interest rates have calmed down a bit when we come to re-mortgage. If you live in an expensive area it’s hard to avoid a big mortgage. We’re in the SW.

I'm genuinely baffled as to what you spent 3k of bills on. Is this childcare (temporary cost), expensive car payments or massive debts? You don't have to answer but I'm wondering whether this is necessarily similar to what the OP will be experiencing.

I think a good guide to debt is 3.5x your gross income & the repayment is no more than 33% of your net monthly income.

Use a mortgage amortisation calculator to determine the impact if your rate goes up. See what level of interest rate high you can absorb (a) comfortably and (b) by making cut backs that you would be able to make.

Also, if you have capacity and to provide extra comfort. Take your mortgage over the longest term you can get say 25 years. Calculate repayment if you did it over 20. Pay the difference into a savings account. At the end of the fixed rate, you can then either use that money to knock off a lumpsum before fixing again or have if as a buffer of you are fixing at a higher rate.

For me it would really depend on what other outgoings you have or expect to have - childcare and any other debt/finance being the biggest one.